Dubai’s main stock market tumbled more than 7 percent Tuesday amid growing fears that the Gulf’s property and investment boom won’t escape fallout from the global financial crisis.
It was the fourth straight session of declines for the Dubai Financial Market. The exchange’s composite index has lost more than 16 percent since the trading week began Sunday.
Emaar Properties, the UAE’s leading publicly traded property developer, and mortgage lender Amlak Finance were among the biggest decliners, with shares of each plunging 9.9 percent. Other companies closely tied to the emirate’s red-hot property market also fell sharply, as did shares of the exchange itself.
The declines, which were mirrored in stock markets across the Gulf, come as concern grows that falling oil prices and gridlocked credit markets are taking their toll on a region that had hoped it could force through ambitious growth plans despite the worldwide slowdown.
“People are now being faced with a new reality, a slower reality,” said Zahed Chowdhury, head of Middle East and North Africa research at Deutsche Bank.
Only weeks ago, Gulf property developers were launching ambitious new projects, such as a tower in Dubai that would dwarf another nearing completion by Emaar that will rank as the world’s tallest. Ubiquitous ads and real estate agents here still promise would-be buyers huge returns on luxury condominiums that are years from completion.
Yet there are signs of weakness. Finance companies in the region have cut back on lending and are requiring borrowers to put down larger down payments. Real estate agents say demand for sales of unbuilt property have fallen sharply.
“Dubai is bearing the brunt of the regional and global market weakness,” said Khaled Masri, partner at Dubai-based Rasmala Investments.
“The market perception is that Dubai is seen as the ‘weakest link’ within the (Gulf),” he said. “This is due to the very high percentage of market capitalization being represented by real estate-related stocks and a perception within the market that Dubai and its companies have very high levels of leverage.”
In perhaps the strongest sign yet that the global slowdown is taking its toll on the region, privately held Dubai developer Damac Holding said this week it will cut 200 jobs, or 2.5 percent of its staff.
The company, which employs 8,000 people worldwide and also has interests in the food industry and other businesses, did not say where the cutbacks would be.
“This continuing global slowdown will inevitably lead all companies to review their staffing levels and recruitment requirements, and as a competitive business the Damac Group has to ensure that it maintains its staffing levels according to market conditions — both good and bad,” Chief Executive Peter Riddoch said in an e-mailed statement.
Other Gulf markets also fell Tuesday.
The index for shares on Saudi Arabia’s Tadawul, the Middle East’s largest exchange, dropped 5.2 percent to close at 5,465.85. Stocks in Abu Dhabi sank 4.9 percent to 2,975.28.
Dubai’s market was hardest hit, with the benchmark index falling 7.3 percent to finish at 2,343.15.
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